Galen devises cure for copycats

Galen Holdings, the Northern Ireland-based pharmaceutical company, signed a preliminary deal yesterday aimed at fending off competition from copycat drugmakers. The move sent its shares up more than 7% to top the UK mid-cap sector.

The women's healthcare company specialises in buying drugs close to patent expiry with the intention of developing new versions that can win fresh protection. It has been seen by the City as particularly vulnerable to the challenge from generic drugmakers.

Yesterday's agreement with US generic drugmaker Barr Laboratories, said to have been the company behind an unsuccessful attempt to take over Galen earlier this year, appears to have defused that threat.

Under the deal, Galen has the option to buy the generic version of Ovcom being developed by Barr, for $19m (£11.9m).

In exchange, Barr would pay $45m for the right to sell Galen's Loestrin oral contraceptive in the United States and Canada, and for access to some of Galen's other contraceptive patents.

Barr would also have the right to make low-price copies of Galen's Estrostep oral contraceptive and Femhrt hormone replacement therapy, but not until six months before their patents expire in 2008 and 2010 respectively.

Analysts at ABN Amro raised their rating to buy from add and increased their share price target to 700p from 680p. Galen shares closed up 44p at 652.5p.